Card reforms to cost less

Westpac now expects little impact from last year's Reserve Bank credit card reforms, despite initial fears they would wipe up to $40 million after tax from its full-year profit.

At a Credit Suisse First Boston conference in Hong Kong, Westpac's chief financial officer Phil Chronican said the cost of the reforms in the year to September 30 next would now only be $15 million after tax.

In 2005 and future years, Westpac now expects the earnings impact to be "neutral".

However, Mr Chronican cautioned that "competitive intensity is increasing . . . and is placing pressure on overall returns".

The Reserve Bank expects the major banks' interchange revenue, the wholesale fees earned by card-issuing banks from card-processing banks, to fall by at least $400 million after forcing a cut in these fees.

But Westpac's experience suggests that it (and most likely other banks) have succeeded in offsetting the revenue hit by offering less generous rewards programs on their most popular Visa and MasterCard credit cards.

Westpac, which last month joined forces with American Express (which is not subject to the reforms) to launch a new card, closed 30c higher at $17.99.